How to select an EMS provider - Part 4

The outsourcing relationship

By Ron Keith

Part 3 of Selecting an EMS Provider discussed the issue of quality in selecting an electronics manufacturing services (EMS) provider and we touched on a few issues around the breadth of services versus service specialization.

In this final installment of this series, we discuss one of the more important aspects associated with selecting an EMS provider -- the outsourcing relationship.

Outsourcing relationships

Today's manufacturing and design outsourcing strategies are a far cry from the tactical, capacity-based outsourcing of decades past. The typical EMS engagement today involves outsourcing huge portions of the OEM's operations and virtually all aspects of manufacturing and supply chain management, thus the EMS supplier is responsible for a large portion of the OEM's revenue stream.

Most EMS relationships span multiple OEM product lines and encompass a wide range of critical processes - often varying from design industrialization all the way through to order fulfillment and after market service. The criticality of this relationship, and the depth; breath, and complexity of the interactions between OEMs and their EMS providers, makes for a relationship somewhat unique from other supply chain relations.

The process of selecting a ‘compatible' EMS provider is almost as important as selecting a ‘qualified' EMS provider. So, once manufacturing and operational executives have made a thorough investigation of potential EMS providers and they've narrowed down the list to a select handful of qualified suppliers, the next, and I would argue perhaps the most important, step is finding a good organizational fit.

Organizational DNA

Organizations, like people, contain DNA and the DNA is created over organizational generations. This DNA is imprinted upon by all of the various players in an organization that have come and gone as well as the cumulative experiences of the organization as a whole.

An organization's DNA greatly influences its culture; policies and procedures, decision-making, risk tolerance, speed of execution, management hierarchy, degree of formality and virtually all aspects of company operations.

Organizational DNA is akin to the personality of the organization, and therefore, holds a tremendous amount of influence over how two organizations will interact with one another. For OEMs, selecting an EMS provider with compatible organizational DNA is of great importance.

But, alas, most companies have no idea how to go about investigating organizational DNA of potential EMS suppliers, and thus learn, in sometimes the most painful way possible, that OEM and EMS organizations have fundamental incompatibilities.

The basic concept of organizational compatibility is central to the OEM-EMS relationship and thus needs to be briefly explored here. The consulting firm Booz, Allen, Hamilton elaborate seven basic types of organizations based on DNA profiles. However, numerous ‘strains' of DNA exist within each DNA category and perhaps one, or even two, additional categories that are not yet fully developed.

Two different ‘types' of organizations with different DNA are not necessarily incompatible; however there are clearly certain organizational types that don't work together as comfortably.